China’s Third City Tops List for Luxury Rental Growth

Guangzhou rises even as Chinese economy threatens to sputter

By Kathryn HopkinsOriginally published on March 21, 2016|Mansion Global|

The Chinese city of Guangzhou saw the biggest jump in luxury rents of any city worldwide last year, despite the country’s economic turmoil.

With annual growth of 5.3%, the sprawling city on the Pearl River in southern China topped Knight Frank’s Prime Global Rental Index, which tracks the change in luxury residential rents across 17 cities worldwide.

With a population of more than 13 million, Guangzhou is China’s third largest city after Beijing and Shanghai. In 2014, it ranked eighth on the index, with Tokyo taking the top spot. In 2015, Guangzhou jumped to number one and Tokyo tied for second place with Toronto, with growth of 3.3%. They were followed by New York and Shanghai.

At the other end of the scale, Geneva displaced Moscow as the weakest-performing market in 2015, with rents falling by 7.1% annually. This was partly driven by strong supply in the picturesque Swiss city.

Overall, Knight Frank’s prime global rental index fell by 1.1% in 2015, down from 2.5% in 2014, although this masked large regional variations in terms of rental performance. For instance, North American cities recorded the strongest rise in prime rents, up 2.8% on average; Europe saw the largest decline, with average prime rents sliding 3.5%.

The world’s top financial centers saw mixed results, the report shows. Rents fell in Hong Kong and Singapore by 0.8% and 3.8%, respectively, while Tokyo, New York and London recorded rises of 3.3%, 2.4% and 0.7%.

“The performance of prime global rental markets is intrinsically linked to each city’s employment market and, in particular, the professional services sector,” said Kate Everett-Allen, a researcher at Knight Frank. “Muted performance in equity markets and record low commodity prices contributed to the index’s weaker performance in 2015.”

Due to negative interest rates, low commodity prices and the ongoing slowdown in China, further uncertainty is likely.